Despite a long history of mining, the UK is a big net importer of many minerals, particularly metals, and the domestic mining industry here is dwarfed by global behemoths like Canada, South Africa, Australia and Chile. But London is also the world’s biggest centre for investment in the minerals industry, with the numerous mining companies listed on the London Stock Exchange's markets including BHP, Rio Tinto, Glencore and Anglo American. Moreover, HM Government is committed to securing more resilient and sustainable sources of critical minerals, to help meet the UK's ambitions on Net Zero and economic growth, and this may include upstream mining activity in Cornwall and elsewhere, midstream processing and refining and, importantly, recycling and resource recovery.
So it is worth noting the impact of the new UK National Security and Investment Act 2021 (NSIA) pursuant to which, with effect from 4 January 2022 (and with a lookback to acquisitions completed before 12 November 2020), HM Government can scrutinise and intervene in certain acquisitions that could harm the UK’s national security. The Government can impose certain conditions on an acquisition, and in rare cases may unwind or block an acquisition completely. This means that if you are planning an acquisition of a "qualifying entity" (QE) in one of 17 defined "sensitive areas" of the UK economy, you may need to get approval from the UK Government before you can complete it. Completing a notifiable acquisition without approval will mean the acquisition is void, and may mean that the acquirer is subject to civil or criminal penalties.
What is a QE?
A qualifying entity is any entity other than an individual, including:
- a company
- a limited liability partnership (LLP)
- any other body corporate
- a partnership
- an unincorporated association
- a trust
If an entity is formed or recognised under the law of a country or territory outside the UK, it can still be a QE if it either:
(1) carries on activities in the UK; or
(2) supplies goods or services to people in the UK.
However, it is important to note that only the acquisition of QEs that are engaged in sensitive activities in the UK itself will constitute a ‘notifiable acquisition’ for the purposes of the new mandatory notification regime.
Also, HM Government's Guidance clarifies that the entity being acquired is not likely to be a QE just because it does any of the following:
- has staff who work remotely for a non-UK office, but are based in the UK
- has owners or investors who are based in the UK
- buys goods or services from UK-based suppliers
- has a parent company that also has other subsidiaries that carry on activities in the UK
- lists securities on a regulated or exchange-regulated market in the UK,
which should reassure overseas participants in the UK capital markets.
When is Mining a Sensitive Area?
The wider "Advanced Materials" sensitive area includes the activities in relation to "Critical materials" specified in Schedule 1 of The National Security and Investment Act 2021 (Notifiable Acquisition) (Specification of Qualifying Entities) Regulations 2021).
That means that a QE carrying on activities that consist of or include the "extraction, refinement, processing, production and end of life recovery (in single element, compound or product form)" of any of the following materials:
(i) activated carbon; (ii) antimony; (iii) arsenic; (iv) beryllium; (v) bismuth; (vi) boron; (vii) cadmium; (viii) cerium; (ix) chromium; (x) cobalt; (xi) dysprosium; (xii) erbium; (xiii) europium; (xiv) fluorspar; (xv) gadolinium; (xvi) gallium; (xvii) germanium; (xviii) graphite; (xix) holmium; (xx) indium; (xxi) iridium; (xxii) lead; (xxiii) lithium; (xxiv) lutetium; (xxv) mercury; (xxvi) molybdenum; (xxvii) neodymium; (xxviii) niobium; (xxix) osmium; (xxx) palladium; (xxxi) platinum; (xxxii) praseodymium; (xxxiii) rhenium; (xxxiv) ruthenium; (xxxv) samarium; (xxxvi) scandium; (xxxvii) selenium; (xxxviii) tantalum; (xxxix) tellurium; (xl) terbium; (xli) thulium; (xlii) tungsten; (xliii) vanadium; (xliv) ytterbium; and (xlv) yttrium,
will be caught by the mandatory notification regime, PROVIDED THAT the relevant QE "carries on the activity in the United Kingdom" (see reg 2(2) of the Regulations).
So what does that mean in practice?
The number of mining companies actually extracting these materials in the UK is likely to be limited- although it is growing steadily, through the likes of Cornish Lithium and Tungsten West (and it is also worth noting that some of the critical materials on the list may be by-products of other extraction activities).
However, the UK's growing focus on critical mineral supply chains has led to the development of a number of integrated business models to combine mining of primary material overseas with midstream activities such as refining, processing and recycling in the UK itself (for example, in the evolving Rare Earths sector- which features very prominently in the critical minerals list). That will bring those companies squarely within the mandatory notification regime, even where their upstream mining activities are outside the UK.
It is also important to remember that this is a dynamic sector, and under the Regulations the Secretary of State must carry out a 3-yearly review of the Regulations. Technological advancement and supply chain evolution (e.g. material substitution) is likely to be reflected in the list of critical materials as updated from time to time.
The development and utilisation of Advanced Materials across Defence as well as civil sectors is rapidly growing and is crucial to help transform important industrial sectors and underpin key areas of high-value manufacturing.